If you're like most Americans, you believe Social Security is a promise that should not be broken. However, despite wide support for Social Security among all age groups and political affiliations, some policy makers in Washington are proposing Social Security benefit cuts. These so-called "fiscal hawks" have suggested cutting Social Security will show America is "serious" about fixing the fiscal mess created by a decade of failed economic policies, despite the fact that Social Security has not contributed one thin dime to the deficit.
The President's Fiscal Commission, which will report its findings in December after the mid-term Congressional elections, is stacked with deficit hawks who have repeatedly called for cuts to Social Security in the past. In order to correct misinformation about Social Security, its funding and our current fiscal crisis, the National Committee to Preserve Social Security and Medicare has compiled an advocacy guide to help individuals to understand the Social Security program, recognize how proposed changes like raising the retirement age are really benefit cuts in disguise, and learn the facts about Social Security.
What Americans Think About Social Security :
Did you know that 96% of Americans agree that Social Security money belongs to the people who contribute and to their beneficiaries? Also , Americans do not believe Social Security is a major cause of the deficit � it was only cited by 2% of Americans as the primary cause of the deficit. Americans are widely opposed to cuts in Social Security benefits with 78% oppose raising the retirement age. Visit our website to see the rest of the results of our bipartisan poll on Social Security.
Social Security Myths:
Myth 1: "The cost of Social Security is a burden to our grandchildren"
The truth: Social Security costs are expected to grow only slightly as a share of the U.S. economy and will remain quite manageable. As a proportion of the Gross Domestic Product (GDP),Social Security costs are projected to rise from under 5% in 2009 to just over 6% in 2034 and then drop back down to only 5.8% by 2050. Traditional pension plans have all but disappeared. Only about one half of all Americans have access to a retirement plan, such as a 401(k), at work. And those who are saving have a median account balance of $70,000 in their plans as they approach retirement. It is clear our children and grandchildren will need Social Security more than ever when they are ready to retire. They can't afford not to have a Social Security program.
Myth 2: "Social Security will soon go bankrupt"
The truth: If Congress does nothing - makes no changes at all - Social Security is projected to deliver full guaranteed benefits until at least 2037. Even after 2037, again without any changes, the trust funds will continue to pay 78% of benefits for decades into the future. The program was adjusted in 1983 to prepare for the baby boomer bulge. To date, Social Security has paid benefits in full and on time for nearly 75 years. If Congress enacts modest changes, Social Security will be able to meet 100% of its benefit obligations indefinitely. As one of the most successful government programs ever, the administrative costs to run it - less than 2% - are far below what Wall Street will ever charge investors for private retirement accounts.
Myth 3: "The Social Security Trust Fund is full of worthless IOUs"
The truth: Social Security's surplus is invested in American government securities. Like other government bonds, they are backed by the full faith and credit of the United States . That means that as long as the government is around, it is obligated to pay both principal and interest on its securities. The federal government has never defaulted on its bonds, which are considered one of the safest choices in an investment portfolio. The Social Security Administration provides more details on the Trust Fund here .
Myth 4: "The government is raiding the Social Security Trust Fund"
The truth: Because Social Security takes in more in taxes than it spends in benefits, it has a current surplus of $2.6 trillion invested in bonds. A bond is like a loan to the federal government that earns interest. While the federal government uses the money loaned by the Social Security Trust Fund to pay for other government spending, just as with other holders of U.S. securities, the government is legally obliged to repay the holder when the bond comes due. There has not been one case of the government failing to pay a bond holder.
Myth 5: "People are living longer, so we should raise the retirement age to 70" The truth : Proponents of increasing the retirement age argue that people are living longer, and, therefore, can continue working for more years. Although it is true that people, on average, are living longer, these longer life expectancies are by no means across-the-board. Studies have shown a strong correlation between longevity and income. That is, most of the increase in life expectancy for those who reach age 65 is enjoyed by workers with higher incomes. This is not surprising considering they are less likely to have physically demanding jobs and more likely to work in jobs with high-quality health insurance coverage.
It is also important to note that not everyone is healthy enough to continue to work even if they would prefer working into their later years. This is especially true of workers with physically demanding jobs. While fewer factory jobs exist today than in the past, many service jobs are backbreaking, including nursing and nursing home care, janitorial jobs, outdoor service jobs, waitressing, or any job where workers have to stand on their feet all day. Millions of American workers have these jobs, and asking them to work an additional 3 or more years is often simply not possible for them physically.
Finally, while many older workers may be healthy enough to work, jobs for them may simply not exist. Although high-income professionals are often encouraged to continue working indefinitely, few employers are eager to employ 70-year-old blue-collar or service workers. In fact, older workers are typically among the first targeted for buy-outs or reductions in force when the economy contracts, and are rarely recruited by employers absent a severe worker shortage .
The 2010 Social Security Trustees Report :
I just read in the news that Social Security is in the red...what's that all about? Whether intentionally or unintentionally, those who assert that the "surplus in Social Security is disappearing" are misleading the American public. In fact, Social Security has two types of surpluses: the "annual surplus" and the "total assets" (sometimes also known as the "surplus"). An "annual surplus" occurs in any year in which the revenue to Social Security that year exceeds the outgo for the year. As those annual surpluses accumulate over time, they become the "total assets" of the Social Security Trust Fund. Because many people refer to those accumulated assets as Social Security's surplus, they may incorrectly conclude that the reduction in projected annual surpluses over the next few years means that all of the assets in the Trust Fund, which equal over $2.5 trillion, will disappear in the short term and that Social Security will soon be unable to pay benefits. The truth is that, even after taking into account the impact of the recession, the assets held by the Trust Fund will continue to permit payment of full benefits until 2037.
Read our full analysis of the Social Security Trustees report here .
Fiscal Commission FAQs:
What is the National Commission on Fiscal Responsibility and Reform ?
The Commission, established by Executive Order on February 18, 2010, is charged with improving the nation's fiscal position for both the short and long-term. The Commission is made up of 18 members. Of those members, six are appointed by the President - with no more than four from the same political party; six are appointed from the U.S. Senate - three by the Majority Leader and three by the Minority Leader; and six are appointed from the U.S House of Representatives - three by the Speaker of the House and three by the Minority Leader.
The Commission was charged with making recommendations to (1) reduce annual deficits to 3% of the national economy by 2015 and (2) meaningfully improve the long-range fiscal outlook, including changes to address the growth in entitlement spending and the gap between the projected revenues and expenditures of the Federal Government.
The Commission is required to report its recommendations no later than December 1, 2010. The final report of the Commission must be approved by at least 14 of the Commission's 18 members.
What happens if the Fiscal Commission agrees on a final report?
If a final report is adopted by the Commission, Senate Majority Leader Reid has agreed to give the recommendations an up-or-down vote in the Senate by the end of 2010. House Speaker Nancy Pelosi has agreed that, if the Senate passes the recommendations, the House will also then vote on them.
Who is on the Fiscal Commission ?
Co-Chairmen:
Sen. Alan Simpson. former Republican Senator from Wyoming .
Erskine Bowles, former Chief of Staff to President Clinton
Executive Director:
Bruce Reed, former Chief Domestic Policy Adviser to President Clinton
Commissioners:
Sen. Max Baucus (D-MT)
Rep. Xavier Becerra (D-CA 31)
Rep. Dave Camp (R-MI 4)
Sen. Tom Coburn (R-OK)
Sen. Kent Conrad (D-ND)
David Cote, Chairman and CEO, Honeywell International
Sen. Mike Crapo (R-ID)
Sen. Richard Durbin (D-IL)
Ann Fudge, Former CEO, Young & Rubicam Brands
Sen. Judd Gregg (R-NH)
Rep. Jeb Hensarling (R-TX 5)
Alice Rivlin, Senior Fellow, Brookings Institute and former Director, Office of Management & Budget
Rep. Paul Ryan (R-WI 1)
Rep. Jan Schakowsky (D-IL 9)
Rep. John Spratt (D-SC 5)
Andrew Stern, former President, Service Employees International Union
How do we know some members of the Fiscal Commission are advocating for Social Security cuts?
The new co-chairs of the Commission have announced their intent to aim squarely at Social Security and Medicare. In an interview on the cable news station CNBC , Co-Chair Alan Simpson noted that the Commission would be going after "the big three - Medicaid, Medicare and Social Security."
Likewise Co-Chair Erskine Bowles made it clear that Social Security topped his list for slashing benefits. "We're going to mess with Medicare, Medicaid and Social Security because if you take those off the table, you can't get there," Bowles said in a speech to North Carolina bankers.
Why would they cut Social Security?
Chairman of the Federal Reserve Ben Bernanke didn't hesitate to reveal their real reason for wanting to cut Social Security benefits. Citing bank robber Willie Sutton's famous remark about why he stole from banks, Bernanke said because "that's where the money is." The fiscal commission intends to cut Social Security benefits, to pay for the damage done to our economy after a decade of failed economic policies. Americans want fiscal sanity returned to Washington , but they know that Social Security is not responsible for our budget deficit. The real reason for the budget imbalance is billions of dollars in tax cuts for the wealthy, a decade of borrow and spend policies and a recession driven by the excesses of Wall Street.
Social Security has not contributed one dime to our nation's deficit. The Social Security Trust Fund was built up in preparation for the baby boomers' retirement. In fact, the annual surpluses in Social Security have been used for years to help balance the federal budget.
Today Social Security is owed $2.6 trillion, money which was previously loaned to the federal government to cover the cost of other programs. But budget hawks are arguing that there is not enough money to pay back the loan from Social Security, so their strategy is to cut Social Security benefits instead.
Working Americans of all ages have contributed money to Social Security and that money belongs to them, not the government. That money is dedicated to paying promised benefits. Social Security should not be used as a piggy bank to pay for bad fiscal decisions of the past.
Potential Social Security Cuts and What You Need to Know About Them:
Raising the Normal Retirement Age
According to the Social Security Trustees, the Social Security Trust Fund will be able to pay full benefits until 2037, and incoming payroll taxes will be sufficient to pay about 78 percent of benefits thereafter. Some are using this modest gap in long-term funding as a pretext to justify proposals for large cuts in Social Security benefits destined to reduce the federal deficit. One frequently discussed change to Social Security is to increase the age at which a retiree receives full benefits. For most workers, increasing the normal retirement age will result in a cut in benefits. It is therefore not surprising that this proposal is very unpopular with the American public.
NCPSSM Government Relations Director Maria Freese debates raising the retirement age on Wisconsin Public Radio at http://www.ncpssm.org/video/wpr_maria_freese.mp3 .
Watch "Too Old to Work - Too Young for Social Security" our video on raising the retirement age.
Social Security benefits upon retirement are determined by the contributions made during a person's working career. The relationship between earnings and benefits is a fundamental feature of the program that distinguishes it from welfare programs and other non-earned entitlements. Means-testing Social Security would break this historic relationship and convert the program into a welfare program.
One option to cut benefits, which was proposed by former President Bush and rejected but is once again being considered, is to change the wage-based formula for determining initial Social Security benefits to price-based.
Price indexing Social Security is a profound transformation of the current program from one based upon workers' contributions during their working lives to a flat benefit provided to all workers, irrespective of their contributions. Over time, this benefit would drop to welfare-like levels. This would convert the current universal social insurance program into a means-tested welfare program, eventually undermining the broad public support that Social Security has enjoyed for 75 years.
Proponents of privatization
promise ownership of accounts and big investment returns.
They argue that Social Security is in a deep and immediate financial crisis that
cannot be resolved without dismantling Social Security and converting it into a
system of market-based individual investment. To support their arguments,
proponents of privatization have used misleading arguments about the nature of
Social Security, the crisis facing it, and the value of converting Social
Security to private investment accounts.
How You Can Help Protect Social Security
Join the National Committee to Preserve Social Security and Medicare: Become a Member
Write a letter to the Editor: Social Security did not cause our budget mess
Write a Letter to Congress: Social Security did not cause our budget mess
Don't Raise the Social Security Retirement Age
Send a Social Security E-Card: Keeping the Promise
Call our Legislative Hotline at 1 800 966 1935
Resources: